Product liability case law in 2021 brought clarity to certain causes of action that often form the basis of product liability claims. In particular, Ontario courts considered new duty of care categories arising within the commonly pleaded negligence cause of action, and within claims for breach of express warranty and breach of the implied warranties that underlie consumer protection legislation. These decisions provide updated guidance in the context of both motions to strike and motions for certification. Manufacturers carrying on business in Canada should be aware of these developments.
Negligence: The Duty Owed by Manufacturers of Inherently Dangerous Goods
In Price v Smith & Wesson Corp, the Ontario Superior Court of Justice determined on a preliminary motion to strike that gun manufacturers, and manufacturers of other inherently dangerous goods, may be responsible for the misuse of their products when feasible safety measures could have prevented harm.
This proposed class action arose out of the “Danforth Shooting” in Toronto, which involved a stolen Smith & Wesson handgun. Smith & Wesson argued that the Court should strike the plaintiffs’ negligence claims in part because Smith & Wesson did not owe the plaintiffs a duty of care under any recognized category of duty
The Court declined to strike out the plaintiffs’ negligence claims after identifying two potentially applicable duty of care categories: (i) the “goods dangerous per se” category, under which manufacturers of a good “dangerous in itself” owe a duty to those who necessarily come within the good’s proximity; and (ii) the modern “products liability” category, under which manufacturers of a good with a design defect owe a duty to those who are injured because of the defective good. The Court accepted that Smith & Wesson could be found to have failed to satisfy these duties by not making use of “authorized user technology” allowing handguns to be fired only when activated by an authorized user.
This decision could significantly affect the firearms industry in Canada, and may reverberate in other industries as well. But the decision, which was decided on a preliminary motion-to-strike standard, leaves open questions of whether independent criminal acts by a third party can affect liability, what precautions would satisfy these duties, and when a good is “dangerous in itself.”
Negligence: Clarifying Pure Economic Loss
The Ontario Superior Court of Justice’s 2021 decision in Carter v Ford Motor Company of Canada interpreted and applied the Supreme Court of Canada’s 2020 decision in 1688782 Ontario Inc v Maple Leaf Foods Inc, showing the limited scope of negligence claims for pure economic loss. Bennett Jones acted for Ford.
Claims for pure economic loss encompass claims for lost profits, reputational harm, and other economic injuries not accompanied by harm to person or property. In Carter, the plaintiffs alleged that certain Ford vehicles contained a water pump defect that created a propensity for dangerous engine failure after “moderate mileage.” A subclass sought to recover damages for the diminution in value of the defective vehicles.
Applying Maple Leaf Foods, the Court refused to certify the claim because the plaintiffs failed to plead an “imminent threat” of injury to person or property, instead pleading that the defect may arise “at some indeterminate time in the future,” which the Court characterized as a “danger … that may never be borne.” The Court also held that diminution in value would not be recoverable, since recovery in pure economic loss cases is limited to the costs of averting injury.
Carter emphasizes the limited scope of, and recovery in, negligence relating to pure economic loss, and will likely guide future courts in their interpretation of Maple Leaf Foods. Similar decisions in other Canadian jurisdictions will likely do the same. For example, in 0790482 BC Ltd v KBK No 11 Ventures Ltd, a British Columbia case, the unit-owning plaintiffs failed to recover the costs of repairing allegedly dangerous exterior windows in the ShangriLa Hotel because they did not plead a “real and substantial danger” to their property (i.e., their units). Looking ahead, Canadian courts will likely continue to explore the “imminent threat” and “real and substantial danger” requirements and further clarify what costs are required to avoid injury.
The Court in Carter also refused to certify the plaintiffs’ claims for breach of express warranty and breach of the implied warranties under consumer protection legislation across Canada, highlighting the difficulty of certifying those claims.
The breach of express warranty claim was found to be flawed because the plaintiffs sought to recover damages for alleged design defects that occurred outside the terms of the express warranty, rather than for defects in materials or workmanship that arose within the terms of the warranty. The breach of implied warranty claim was flawed because there was no privity of contract between Ford and the plaintiffs, since express warranties are contracts for the supply of services rather than goods.
The Court held that both types of warranty claims lacked commonality because of their inherent variability. In addition, the breach of implied warranty claims lacked commonality because of variable provincial legislative regimes
Carter illustrates the challenges when seeking the certification of breach of warranty claims, whether due to inherent variability in those claims or the unwillingness of courts to expand express warranty protections beyond their terms or to work around privity requirements. Going forward, we expect that Canadian courts will continue to carefully scrutinize requests in class actions to certify warranty claims.